it would become suddenly unreliable and a liquid would throw shock waves for the entire global financial system current us public debt amounts to fourteen point two trillion dollars and is more than ninety eight percent of the country's two thousand and ten g.d.p. if the debt ceiling is not race the administration has warned it will not have the resources to honor its external debt obligations as well as internal entitlements such as social security benefits i cannot guarantee that those checks go out on august third if we haven't resolved this issue because there may simply not be the money in the coffers to do it however short the default may be it will undercut the credibility of the u.s. financial system in the world damage the value of the dollar and drain investor confidence major credit agencies such as moody's and standard and poor's have threatened to downgrade the u.s. rating what we're looking for is a raising of the limit it doesn't matter the process that they get that the debt limit has already been raised almost one hundred times and doing it now shouldn't

pose a serious challenge if it weren't for partisan friction over ways to slash the budget democrats have put forth several deals that feature a hefty spending cuts but they struggle to get republicans on board over their opposition to tax increases everything's on the table it's just raising taxes on america on the american people while analysts continue to issue warnings president obama has been adamant about hammering out an agreement has called the debt ceiling crisis a unique opportunity to do something big there is little doubt that a deal will be reached by the august second deadline though so far tackling america's debt and reforming its fiscal policies has been a political football many want to take advantage of and want to be responsible for . for cross-talk our team. ok dignifying go to you first in new york what is this all about because we just we just heard in that report the debt ceiling has been increased over and over and

over again but all of a sudden this time it's a huge political event is sidelined everything else why this time. well it's interesting you suggest the other day that we abolish the debt ceiling altogether exactly pretty good idea but i think the republicans would like to use this they're playing a game of chicken they want to use this as an excuse to manage impose deep cuts in medicare and social security programs that are very popular very successful and that kind of agenda could not survive a normal political debate polls repeatedly show that americans don't like the idea of cutting medicare and social security because they benefit scores of millions of people and everyone in the society will presumably benefit from it eventual so there's just no appetite for the kind of agenda they they're trying to sell but they're trying to use their play chicken blackmail the president to giving way on this and the president has demonstrated in the past that he is a master of preemptive compromise so i think they're hoping that he will just blink and give way and they'll get far more than they could through

a normal political debate when you think about that howard is this is all in a spa politics here because i wanted everyone i think assumes there's going to be some kind of deal what everyone wants to see is someone caught holding the bag and that's what the republicans want they want obama to blink and to cave in because we do they're going to have to have this ceiling raised. well i think i agree partially with doug but i think we have to specify what part of the republican party we're talking about in two thousand and ten republicans won the house there were eighty seven freshmen representatives in washington never served before who represent the tea party which is adamantly for cutting spending these people were elected on that basis and they've come to washington with what many say is a religious zeal to cut spending to the exclusion of almost everything else i personally think this is both a spending problem and

a revenue problem for fifty years from one nine hundred fifty to two thousand we averaged about eighteen percent of g.d.p. came in from tax revenues twenty percent went out from spending a very manageable two percent gap that persisted more or less through the two thousand until two thousand fiscal two thousand and nine when the recession and the and the fiscal cry in the financial crisis caused it to go to fifteen percent of revenue and twenty four percent of outlays i'm nine percent gap that's really what explains the problem so i personally think that you need to address both sides of the issue revenues and spending and there are different ways to deal with it doug what do you think obama uses the term grand bargain what would be the grand bargain in your opinion. well i think what's eventually going to emerge is that there will be some cuts to medicare social security more than the democratic base we happy with and that could cause a bomb of some problems down the road. then maybe closing some some kind of tax

loopholes you know the private jet loophole which is more about posturing than actual revenue the carried interest poll for private equity guys you know the i.m.f. i believe has done a review of debt reduction packages or deficit reduction package that around the world they generally have about a four to one ratio of spending cuts to tax increases i presume that's the kind of . bargain that we'll see come out of this but the tea party who represent less than a quarter of the house of representatives they are a minority view. nonetheless want to push it up to one hundred percent spending cuts and that you know is just not some compromise that's not bargaining that's just they want to get their way they'll go in there they're willing to push the economy over a cliff to get their way or go ahead our new but it's very interesting is because the republicans what they want the republicans want to bad economy going into the election cycle go ahead. well i don't know about that but i do know that the tea

party people are now really have really it's the tail wagging the dog in the republican party and even the leadership is very very worried about their influence for one simple reason in america we have primaries where in each party they vote the candidates get chosen and and if the tea party people or any of the congressman republican congressman vote for a big deal that includes tax increases they're guaranteed to get a primary challenge next year that's the first electoral challenge they will face and that's what's on their minds that's what they're really worried about. it all about ideology i mean this is extreme i think howard's got a really good point there i mean they just want to get reelected again i'll go back to my earlier point if they don't really care about the economy is modified to the worse the better for the republicans i want to challenge obama and they in two thousand and twelve go ahead oh i actually think i think some of the tea party but i would agree welcome to how it's going to go no go doug go ahead ahead go. but

yeah they'll face what i challenge quite possibly although i think that the tea party people have been elected from very conservative districts in less conservative districts they might not win a challenge but you know polls show that the public insofar as it understands this issue doesn't like the idea of raising the debt ceiling but realize that you have to do something about getting the deficit down over the longer term and want some kind of mix of tax increases and spending cuts now if you ask the question very specifically do you would you like to see taxes rise people with six figure incomes or would you rather see medicare and social security cut there's no question that people would like to see a rise in taxes on the upper brackets that's in the sixty to seventy percent range is the polling for that is pretty strong but that this is not what the true believers in the tea party want they want you know a very dramatically smaller government they have had it out for the new deal and the great society for generations really we can go back to the one to early one

nine hundred fifty s. to hear some of this new deal rhetoric they've just achieved a kind of salience in american politics that they didn't used to have it used to be very much a minority fringe view and now while though it's still a minority fringe you it's more like a quarter of the population and they somehow are really dominating the discourse partly because the president is not not a tough bargain or i think partly because he would like to see some of these cuts himself he's a he's not a radical socialist of tea party fantasy he is very much a centrist deal see market friendly democrat and wouldn't mind seeing some cutbacks in medicare and social security and maybe even partial privatization of social security although that would be quite a dramatic blow to a lot of people and the democratic party when you think about that hours because you know balmy i would disagree i have to go ahead jump in go ahead yeah i would disagree with doug on one thing i mean i think there are more than a fringe i think they represent a substantial part of the republican party and more importantly they turn out big

in elections. they turned out in two thousand and ten and obama supporters didn't obama doesn't a problem with his base if he agrees to cuts in some of these programs these these social programs that are at the core of the democratic amission a lot of people are going to sit home not work for him not give money not given the kind of enthusiastic support that helped them win comfortably in two thousand and eight whereas the tea party people are likely to turn out because they're angry they're upset they're frustrated even if they get some what they want they want all of what they want because that's their vision of the country we have two different visions of the country in a way facing off against each other. doug you want to jump in there are actually that i think yeah paradoxically i think the democrats would actually welcome a tea party take over the republican party to some degree you know if we survive a debt default the world at work barrels a year from now the i think that obama would like to run against a radicalized republican party his dream would be you know michele bachmann because

these candidates you know they i think probably represent about twenty five percent of the american electorate they are enthusiastic and obama is going to suffer from some kind of demoralization of his base but if the republican party is seen as rabid insane that just goes against american grain the american in speed they're going to jump in here we're going to go to a short break and after that short break we'll continue our discussion on the u.s. debt stay with our kids. and. hungry for the full story we've got it for. the biggest issues get a human voice ceased to face with the news makers. forty two thousand americans

die each year car accidents thousand. seven hundred thousand people. and thirty two thousand will kill themselves cancer in all its forms kills five hundred sixty thousand of us here part is easy the more devastating it kills over eight hundred seventy thousand americans every year. who's.

going to. say. well i'm sorry i'm peter lavelle to remind you we're talking about america's debt crisis. and you can see. ok if i go back to you

all through this debate a heated debate on capitol hill. we hear a lot of numbers coming out what could happen if there is a default and i mean the republicans say they obama and his people are playing square using scare tactics is that a fair thing to say. well i think they can manipulate you know that we hear this august second deadline i think they can manipulate for weeks maybe months and play games and keep things going for a while so it's not a hard deadline by any means but you know if there is a default that is very really really dangerous you know the u.s. treasury securities are kind of the bedrock of the world's financial markets and something that nobody's really talked about but i think could be a problem is that there are a whole lot of derivatives contracts and such that depend on cash flows from treasury interest payments we don't really know what happened that would be interrupted it could be quite disastrous as we found on the mortgage securities crisis we didn't know how vulnerable we were to what actually all blew up so we could see something very similar should should have all come to pass how and why

what about this idea of just maybe like three months you know extend the the ceiling then three months then three months is that just a way to keep this topic in the in the as a debate a debating point and not talking about unemployment and talking about other problems of the u.s. economy house. well that's a good point president obama has ruled that out he said he would not agree to that one thing that's being discussed in washington now is a proposal by the senate minority leader mitch mcconnell republican from kentucky who's saying ok we will raise the debt limit in three installments before the election give the president the authority to to do it to paraguay so it's on his head and that's one thing that's being discussed of the kind of ugly stupid kinds of things that come out of washington that people hate i do think though your point about unemployment is really really key because republicans won the last election saying democrats haven't focused enough on jobs that was true they haven't either and there's a reason for it i believe that public policy there are no real public policy

remedies for the kind of employment situation we face right now nine point two percent official unemployment maybe sixteen percent employed or underemployed maybe at many others that aren't even counted we're seeing structural changes in the economy that neither the pump priming of keynesianism the monetarism of the monetary spending of the fed of milton friedman nor the tax cuts of the supply siders have been able to address and that's the underlying issue and that's the thing the politicians won't tell the public doug what do you think about that that's very interesting what howard had to say i mean the tool box is empty is that what it is that what's happening here. well old fashioned and i think actually some sort of old style keynesian programs would would have an effect but i think that the there is a serious structural problem the us economy there's no doubt about that we've. we've seen for the last three decades really stagnant to falling real wages and

stagnant to falling household incomes a whole lot more instability and volatility in people's economic fates and for many decades that instability was somewhat papered over by a lot of borrowing we saw a lot of credit card use and especially mortgage use you know from during the from the mid ninety's to the mid two thousand and then then it all fell apart and i think now the u.s. economy is really just kind of limping along because there is just no dynamism to it at this point there's no leading sector it's not like you know the one thousand nine hundred we had steel and railroads in the early twentieth century we had the automobile. then you know after world war two we had suburbanization there was a there was a feeling maybe in the ninety's that technology could do that but that didn't really pan out so there's no dynamism anywhere and i think we could develop some dynamism and a real leading sector if we fostered clean energy environmentally friendly technologies which would require government action which would be

a long term growth strategy but we're not really talking about that republicans don't like things like railroads because i think they're pansies in europe it's seen as being a thing that european pansy's like so there's just there's no dynamism there's no leading sector and i think what we're seeing now is the underlying structural pathology of the u.s. economy the polarization the instability really. you know i think our day in the sun perhaps is past and we're now suffering from from really really long term problems that we can't even have a grown up conversation about them all this pos let me let me just in a make tragic and embarrassing go ahead go ahead howard bryant. let me jump in and make one big and very interesting example and yet in monday's wall street journal they reported that the wireless industry which is having record revenue record numbers of people being drawn in by smartphone employment is actually down twenty percent from the peak in america and they've lost twenty thousand jobs since the recession ended why is that because

a lot of people with sma starting smartphones are technologically savvy they don't need call centers they don't need service reps companies are cutting those people technology and product has increased productivity and cut the need for workers this is a global phenomenon the second part of that of course is that a lot of the things that used to be made in the united states are now being made in china in indonesia in malaysia cambodia eastern europe plenty of other places we're seeing a lot of these structural issues of as the economy evolves a lot of people are not prepared to work for facebook and and linked in and twitter and all the new startups who are hiring ph d.'s and masters graduates in computer science and m.b.a.'s from stanford but the vast majority the public does not have those skills dug what you know shouldn't the united states be taking tearing a page from the european script from the euro zone script because austerity that's what that's the reality they're only going to the euro zone may have ten years to

do just flat growth you know austerity increased taxes that's the only way they're going to get out of their mess why doesn't the u.s. do it. well i think for one thing the american working class has been experiencing austerity for several generations now so you know it's not it would not be a novelty but if we look at the european example of the countries that have cut their budgets have not seen their economies turn around they've they've they're problems of deep and britain now is on the leading edge of an austerity program and we've seen investment falloff and retail sales weaken their very dramatically so the british economy is not strengthening in response to the budget cutting as a lot of budget cuts claim it would it's doing quite the opposite greece and ireland are sinking deeper as they cut i think we may see similar things happening in spain and italy coming up it's that's the economics one hundred thirty s. that's the vicious cycle of deflation and depression and i would hope that we don't

follow that route but we may specially if we have some kind of debt crisis and funding crisis and then god knows where would end up go ahead our jump in but doug but b.s.i. the keynesianism worked only to a certain degree in the united states in the one nine hundred thirty s. it was really only world war two which got us out of the crisis when we went we had when we had deficits they were going up to thirty percent of g.d.p. i mean nope no domestic outlook is going to support spending at that level doug no but we you know i think what i'm saying is what i'm saying is that the pump priming doesn't really work to after a certain point. ok well we had a very very strong growth between one hundred thirty three and thirty seven i mean that we had. very close to ten percent growth between one hundred thirty three one hundred thirty seven the unemployment rate fell by ten fifteen points it was very successful the w.p.a. put a lot of people to work all that sort of thing and did a lot of useful work i mean it's not it's a commonplace now that yes the new deal stuff didn't work but then roosevelt under

the advice of morgan thought as treasury secretary who said business is suffering from a lack of confidence so if we just cut the budget and adopt a sturdy program then business will will shake off its bad feelings and start investing quite the opposite happened and we entered a second wave of depression after nine hundred thirty seven i'm afraid we're going to repeat that mistake it is not one you know we're not experiencing one nine hundred thirty s. levels of unemployment but if we repeat that. reem brace of orthodoxy nine hundred thirty seven i think we're really going to in trouble and it looks like we're heading in that direction howard is the view we keep in with this one and we just were talking about the debt ceiling but let's talk about the debt i mean what is it going to take for the united states to start paying off that huge mountain of debt i mean it's almost impossible to imagine that number ok and most calculators can't use that number it's to take. well it is so huge i mean i saw a program last week which is saying that if you if you look over a long long period of time medicare alone has fifty trillion dollars that's right

fifty trillion dollars of obligations going off over the next say twenty years or we're thirty years this is a huge huge problem and i think the debt ceiling the last year's election the debt ceiling is only the beginning of a discussion that needs to take place here in the united states because the public i think i think doug pointed out correctly that the public supports these programs is not onboard to some radical surgery and i also agree with him that it needs to be planned carefully over the next few years but there is a debt problem all the major industrial countries have this problem simply because the population is aging is going to be but is to need to rely on government benefits and the number of workers is not growing in fact it's shrinking so that the ratio between the number of employed and the number of people they support you know is getting to a point where it's really not sustainable so we're going to need to have this conversation we're going to need the public is going to need to be educated and

discuss it and make up their minds but ultimately we will have to approach this long term spending problem very seriously what about the i mean it's a conversation go ahead doug. it's a conversation it's a conversation we need to have over a long period of time it's not something we need to do with a gun to our head like the way it's going on now. as the congressional budget office with the actions of the deficit are. that the most of the debt most of the deficit we're experiencing now that's nine ten percent of g.d.p. deficit we've had for the last couple of years as a result of the recession and should the economy recover which is certainly not proven but should it recover that and congress does nothing under current legislation according to c.b.s. the deficit will shrink to just over three percent of g.d.p. in the coming years and doesn't really become a problem for another five or ten years so we have the time to have a serious conversation about what kind of society we want what kind of economics that has been how we want to pay for it. again how in the last work did the

business with money off that way how are you going to last for days ahead right. well the last word basically is i think as i said this is the first the first of a long series of discussions of this i think we're right we should not be deciding this with a gun to our head we should go ahead raise the debt ceiling and then have a serious debate in this country about how we're going to deal with the debt problems long term and the different solutions for it ok ok gentlemen let's see what happens on the on august third many thanks to my guest today in new york and thanks to our viewers for watching us here are to see you next time and remember.

join. the grand imperial.

treat. a grim day. capable of dealing. with. voices of support for three photojournalists accused of espionage. as critics question the suspects confession. six. baby reporter just children who suffer in the.

costing around the world and around the clock here watching. the fun a storm surrounding rupert murdoch's media empire is spreading outrage and resignations continue this questions are asked over the death of journalist sean more credited with revealing the phone hacking scandal. reports his. debate over another high profile death at the heart of a different drama. another political scandal erupts another. sure hall was the first news of the world to go on the record to alleged phone hacking was endemic at the paper and that it. encouraged it who was found dead in his house on monday. into a frenzy of comparisons with the case of dr david kelly. why isn't the sun horse story bigger reminds me of how dr david kelly was bumped off eerily similar tragedies of scene who are in david kelly all this madness toward the end david

kelly shawn who are that's what i'm thinking something's not trying to talk to kelly was the u.n. weapons inspector who first cause doubt on the government's claim that iraq could deploy weapons of mass destruction within forty five minutes it led to scrutiny of tony blair's decision to invade iraq it was british journalist andrew gilligan who david kelly had spoken to to publicize his belief that the forty five minute claim had been exaggerated gilligan believes there are similarities between kelly and short haul being at the center of one of these storms a terrifying experience i really don't believe either david or sean hoare was murdered because. i simply don't think it would have been in anyone's interest to murder them once they got into the public spotlight anyone with an iota of sense in government would have known that to kill them would just would just amplify the story i think it simply i think both were under enormous.